Multibagger: Penny stock Refex Industries soared 13765% in a decade, up 1351% in 5 years

Refex Industries, once a penny stock, has delivered exceptional performance for long-term investors. Over the past decade, the company has exhibited remarkable growth, with its stock price soaring by an astonishing 13765 percent, rising from ₹1.19 in June 2014 to trade around ₹165 currently. This significant increase underscores Refex's consistent and substantial value appreciation trajectory, positioning it as a standout performer within the penny stock category. Such extraordinary gains not only reflect its past success but also highlight its potential as a high-return investment opportunity over the years.

Meanwhile, over the past 5 years, the stock has surged by an impressive 1351 percent, rising from ₹11.37 in June 2019. Similarly, over the last 3 years, it has shown significant growth of 466 percent, starting from ₹29.15 in June 2021.

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In recent times as well, Refex Industries has demonstrated strong performance, gaining 38 percent over the past year and 37 percent year-to-date in 2024. The stock has delivered positive returns in 4 out of the 6 months so far this year. In June, it surged almost 22 percent following a decline of over 18 percent in May. Prior to that, it showed robust gains of 23.5 percent in April and 3.7 percent in March, though it declined by 6.8 percent in February. January 2024 saw a notable increase of 15.4 percent in the stock's value.

Currently trading at ₹165, Refex Industries is approximately 11 percent below its record high of ₹184.79, reached on August 2, 2023. However, it has shown strong resilience by surging 64 percent from its 52-week low of ₹100.67, recorded on June 23, 2023.

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About the firm

Refex Industries Limited engages in the handling and disposal of fly ash in India. The company refills hydrofluorocarbons, which are used in air conditioners, refrigerators, and refrigerating equipment. It also generates and distributes solar power; trades in coal and solar accessories; and provides coal crushing and coal yard management services. The company was formerly known as Refex Refrigerants Limited and changed its name to Refex Industries Limited in November 2013. The company was incorporated in 2002 and is based in Chennai, India.

Earnings

In the March quarter (Q4FY24), the net profit of the firm fell over 29 percent year-on-year (YoY) to ₹35.76 crore from ₹50.67 crore in the same quarter last year. However, it grew almost 81 percent on a sequential basis from ₹19.78 crore in the December quarter.

Meanwhile, its total income also declined 45 percent YoY to ₹345.70 crore in the quarter under review as against ₹631.97 crore in the same quarter last year. Meanwhile, in the previous quarter, its total income was ₹305.72 crore.

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Overall for the financial year FY24, the company's net profit came in at ₹100.95 crore from ₹116 crore in FY23. Its total income also fell to ₹1,388.84 crore in FY24 from ₹1,637.44 crore in FY23.

Brokerage view

ICICI Direct's analysis of Refex Industries highlights several positive indicators. The promoter holding has increased by over 2% quarter-over-quarter, indicating confidence and commitment from insiders. The stock has demonstrated strong momentum, trading above its short-term, medium-term, and long-term moving averages, signaling bullish market sentiment and technical strength. Furthermore, Refex Industries has shown growth in net profit along with an expanding profit margin on a quarter-over-quarter basis. These factors collectively suggest a robust operational performance and investor confidence in the company's growth prospects.

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Meanwhile, its weaknesses, as per the brokerage, are:

- Promoters increased pledged shares QoQ

- Decline in Quarterly Net Profit (YoY)

- Degrowth in Quarterly Revenue and Profit in Recent Results(YoY)

Investing in stocks with lower market capitalisation can promise substantial gains owing to their affordability, but it also carries inherent risks. Small-cap stocks often face challenges related to liquidity, leading to lower trading volumes compared to larger companies. Additionally, they may have less stringent financial reporting requirements and oversight, making them vulnerable to market manipulation and fraudulent activities.

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These liquidity constraints and oversight issues contribute to increased volatility in small-cap stocks, posing higher risks for investors. To navigate these challenges effectively, thorough research and the implementation of robust risk management strategies are essential. By adopting these measures, investors can mitigate uncertainties associated with small-cap stocks and protect against potential losses.

Disclaimer: This story is for educational purposes only. Please speak to an investment advisor before making any investment decisions.